Brownstone Beginnings

But while Dimensional’s academic bench was stellar from the
start, its original corporate trappings were decidedly down-toearth.
Dimensional’s first world headquarters was in a spare
bedroom of Booth’s Brooklyn Heights brownstone. When
he requested six phone lines, New York Telephone initially
refused. “They thought we were running a bookie joint,” he
says. “I ended up having to call up the VP of finance and say,
‘Look, we’re a struggling firm out here in Brooklyn, can you
send somebody out?’ So they did—and they became a client.”

It wasn’t just Dimensional’s phone requests that initially
seemed outlandish to outsiders. While indexing would one
day become an industry standard, in 1981, it was regarded as
radical at best. Dimensional’s principals and sales teams made
more than one thousand calls in the first two years of the firm’s
existence, and rejections were the norm.

But it didn’t take too long for their way of thinking to gain
traction. When the New York Times profiled newcomers to
the pension management business in 1983, the story opened
with the sentence, “David Booth makes it look easy.” By then,
Dimensional had landed 48 corporate pension fund accounts
worth $650 million. “And he still has time to take midday jogs
across the Brooklyn Bridge,” the story gushed.

Booth told the Times he expected Dimensional’s approach
to investing wouldn’t be unique for long. He was wrong.
“Nobody else has tried to imitate what we do,” he says now.
“It’s really funny—
and staggering—because to my mind it’s
Economics 101. And I think it’s because at this basic level,
we have this belief in how markets work that we learned
at Chicago Booth that’s difficult for most people to accept. It’s a strong belief system that gives us a degree of freedom to
be innovative.”

For its part, the financial press has always been somewhat
flummoxed by the way Dimensional has leveraged intellectual
heft and data-driven certitude to reap mind-boggling results.
Reading the firm’s clips conjures up an image of Albert Einstein
meets Elmer Gantry, with writers evoking a vocabulary
that includes “wonky,” “brainiac,” and “über intellects” as well
as “crusade,” “revival meeting,” “zealots,” “religious cult,” and “fundamentalists.” It’s not lost on Booth that these are often
the same words used to describe the business school itself. The
success of his company, he says, should offer more than enough
proof that Chicago theories pay off with real-world rewards. “Our business proposition is the value added by implementing
these ideas,” he says.

While Booth himself decided against a career in academia
many years ago, he’s never left it completely behind. He’s written
numerous scholarly articles, and one he co-authored with
Fama, “Diversification Returns and Asset Contributions,”
won a Graham and Dodd Award from the Financial Analysts
Journal in 1992. And he’s still very much committed to passing
on to others the ideas that changed his life. Classrooms are
standard features at Dimensional’s offices. Potential clients not
only have to pass a rigorous screening process, they also have to
attend a mandatory and decidedly un-cushy two-day seminar
on the theories behind Dimensional’s success. Expenses are not
paid. (“We don’t even give them pens,” Dimensional’s Daniel
Wheeler, told Bloomberg News.)